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This episode of the Town is presented by HBO Max, presenting the Emmy award winning HBO original series Hacks for your consideration starring Gene Smart and Hannah Einbinder. The new season picks up with Deborah Vance's late night show finally in production and Ava Daniels stepping in as head writer. To Deborah's dismay, their ever complicated relationship is pushed to new limits as they clash over creative direction and get entangled in blackmail and betrayal. Don't miss the series Slate says has never been better. Now streaming on HBO Max, this episode.
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Is brought to you by CarMax. When you buy a car with CarMax, you call the shots. You want to test drive every car in the lot. Want to shop while you watch the game? Want to match your car color to your sports team? Want to shop online, in store or both? It's your move every step of the way and support from their helpful no pressure associates is there whenever you need. Want to drive CarMax? Shop now@carmax.com it is Friday, December 5th.
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A
It happened. The email alerts have been flying. My phone has been ringing all day. White smoke has emerged from the WB water tower in Burbank. If you haven't heard, Warner Brothers Discovery has found a buyer and it is Netflix. Pretty amazing. Craig, we need some sound effects here, like an air horn, maybe a sad trombone. Anyway, Lucas and I hinted at that on Monday the buzz was growing that the Netflix bid was slightly better than the Paramount and Comcast bids, the other ones that were in the mix. And then boom. This morning, the press Release, it's a $72 billion deal for both the Warner Brothers studio, The Film and TV Library included, and HBO Max, it's $83 billion if you count the debt Netflix is not buying the cable networks, tnt, tbs, cnn, those will be spun off into a new entity. But if this deal closes, and that's a big if, Netflix will get all those thousands of movies and shows, the IP rights to Harry Potter and Game of Thrones and Batman, Superman and a streaming service, HBO Max, with a fantastic brand and about 130 million subscribers worldwide. As bank of America analysts put it recently, the streaming wars are effectively over. All over town, this is the only thing people are talking about. So we had to do an emergency pod. This is our normal Monday pod that we are doing on Friday. For the most part. Everyone I talk to is pretty upset about this. This could be the end of a hundred year old studio, they say. Or is the battle for Warners maybe not over, likely not actually Paramount, which is the Ellison family, they're pretty upset that they didn't get this asset they fired off an angry letter saying the process was rigged and unfair. Comcast is still in the mix too, I'm told. And already some Republicans are urging the Justice Department to take a close look at. At whether this transaction gives Netflix too much power in the entertainment industry. So why is Netflix doing this? How did Paramount not get this deal? And what could they do to get themselves back in the mix? After all, they've got Larry Ellison behind them still, and he's got more money than he knows what to do with. What will Warner Brothers and HBO look like when this deal closes, if it ever does? Lots of questions. So here we've got Lucas Shaw in here on a Friday from Bloomberg, back on the show to discuss. It's the Netflix Warner Brothers emergency pod. Will it actually happen? What's going on? And how bad is it really for Hollywood? From the ringer and Puck, I'm Matt Bellamy and this is the town.
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All right, we are here with Lucas Shaw from Bloomberg, a special Friday edition of our normal Monday pod emergency pod. Welcome, Lucas.
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C
This isn't our first emergency pod, is it?
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A
Oh, no, we've done several. Okay. Yeah, I think we did one when the Netflix stock had its catastrophic drop.
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C
We might have done one when they put Warner Brothers up for sale or Paramount made it.
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A
No, I think it was Paramount. We definitely have done them before, but this certainly qualifies. Emergency moment. Judging by my text messages, emails, people are freaking the F out about this.
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C
Yeah.
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A
Do you think the freakout around town is justified? Open question.
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C
Well, I think the freakout is because nobody really thought that this is the way it was gonna go.
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A
Exactly.
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C
For the longest time, it was like, okay, David Ellison's gonna get it. And people didn't like it, but they had sort of, like, resigned themselves to that fate.
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A
At least he's a rich guy. He's got money. He'll put money into it, you know.
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C
Well, except there was obviously, you know, guilds and filmmakers were concerned because. Oh, my God. Another. Even if David Ellison said he was going to keep the studio separate, it was sort of hard to understand how you'd have two big studios operating independently. Would he need both lots? Would Warner Brothers get sold to private equity, the lot itself, so on and so forth? I just don't think people believed that Netflix was going to do it until, like, last night when we finally kind of like, confirmed that we were going to put out our story saying that it was Netflix. I was actually talking to a class and. And I walked back in and it was all these college students who want to be in the film business. And when I told them what happened, they, like, the room was completely shook. They were. They freaked out.
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A
Why? I mean, I kind of know why.
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C
But because for the same reason that everyone else in the entertainment business freaked out, because, like, Netflix, the, like, kind of the big bad bully of the last 10 years is. Is getting Warner Brothers.
- [05:18]
A
What? Like, yeah, no, it's the Albanian army. They finally took over and they are now running the show. No, it's an amazing turn of events. I mean, if you had predicted even 10 years ago that this would happen, nobody would have forget 10.
- [05:31]
C
5. If you had told me six months ago that Netflix was gonna buy Warner Bros.
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A
Discovery and outbid the Ellisons.
- [05:40]
C
The outbidding. Once you get into the process, I'm not surprised that Netflix won. It was them really getting in and going for it because they just never done anything like this.
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A
Yeah, I didn't think they were that serious about it. I thought they were going to run up the price and, you know, check out the books of the other side and then they're going to be like, okay, we're good.
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C
I got a series of signs throughout the process that led me to believe they were increasingly serious.
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A
So why did they do that? Is my overarching question. Why did Netflix do this?
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C
Rare opportunity to buy one of, if not the kind of most valuable studio library combo if you combine Warner Brothers and hbo, basically. You know, Netflix has been pretty adamant over the years it wasn't interested in buying cable networks. It didn't want any. Like, if you. If you had to boil. Distill their reasons for not doing deals into two, it would be, we don't want the pain and the headache of, like, buying a company and integration and all that. And we don't want to buy any of these other crappy assets like cable networks that don't interest us. And so once it became you can get Warner Brothers and hbo, which, yes, there's a streaming service, yes, there's theatrical distribution, but it is fundamentally one of the great catalogs and libraries in the world. You don't have to take the cable networks. I think it eliminated sort of one of the reasons not to do it. That's the positive.
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A
And Warner's did that. Warner's created this scenario where these assets were more attractive to this kind of buyer over the work that they've done over the past two years, separating the assets and paring off certain things so that it was more attractive.
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C
Netflix looks at that and says, we can Make a lot more money with this. We can use Warner Brothers shows to make the Netflix product more appealing. We can comb the library to remake stuff. We can sell HBO as an add on or not or exactly how that's going to work.
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A
Yeah. Ted said our model is better with these assets and these assets are better with our model is what he said.
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C
There is, of course, the more negative spin on this.
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A
Right, which is that no media merger of this size has ever worked.
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C
Well, no, no, but I mean, we can get to that in a second. But I mean, even though the why they did it, right, which is that Netflix is looking at this and going, okay, our revenue growth is slowing, the amount of time people spend using our service isn't really increasing that much. What is the next lever for us? Like, we did the password crackdown, we've done advertising. Gaming isn't really working. So what do they do? They do the traditional playbook of like, let's go buy something. Right?
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A
Yeah. Someone said to me, congratulations, Netflix, you're a real media company now. You have to merge to grow.
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C
Yes. Now, they were very sensitive to this criticism. Greg Peters at least once, if not twice on that call with analysts this morning said, that's not why we're doing this. Don't worry. We feel confident in our underlying business. But it's one thing for him to say it. If you're doing an $80 billion deal, it suggests there's a positive reason and a negative reason. And then there's, yes, what you said about like, will this actually work? Yeah.
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A
And Greg Peters answer to that and the, you know, why they're different from every other big company that's done every other big deal is he says, we understand these assets.
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That's the big difference. And I know what he means. He means we are already in the business of exploiting film and television and making good content, unlike AOL, unlike AT&T, unlike all of these other schmoes that have come to Hollywood and had their shirts.
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C
Well, look, the good news relative. So this will be owner number four. Assuming this goes through, this will be owner number four in about a decade. And it will be the first time, first of these three deals where the buyer can credibly claim that they're like, they have a real, a feasible plan. Right. AT&T did it. And it's like these, these mergers where you're going to like the notion that you were going to use WarnerMedia product to sell phone subscriptions didn't really make any sense.
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A
Game of Thrones on your phone.
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C
The Discovery deal of if you combine these two things, we can finally compete with Netflix and Disney. Like it made a little more sense.
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A
No, but that was a. But that was. But that was a Hail Mary desperation play by David Zaslav and John Malone. Because they saw that Discovery Communications was a television company going down the tubes, they needed to attach themselves to some sexier assets to hopefully leverage it into something bigger and get someone like a potential Netflix to buy the whole thing. Which ended up happening.
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C
Yeah, 100%. While they have not really outlined in great detail what the plans are, you can see a world in which it works. I'm not saying it will, but there is an industrial logic to it.
- [10:21]
A
You do not believe the conspiracy theory for why Netflix did this, that they know very well this deal will never be approved.
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C
They just wanted to keep it away from everyone for two years.
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A
Yeah, they want two years of nonsense litigation paddling where everybody's at a standstill and Netflix can just grow, grow, grow and. And do its thing and Paramount has been crippled and HBO Max is at a standstill. And then if it's broken up, they will go about their merry way. Maybe they get to pick off a few pieces of ip, which is all they really want anyways. And David Zaslav gets to pretend that he's Louis B. Mayer for a little while, get to sit at Jack Warner's desk, throw parties with Margot Robbie and pretend to be a mogul. He's happy. And everybody gets to, you know, play this out. And in two years, we'll be talking about who the actual buyer of Wanted Discovery is going to be.
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C
I think that's some Galaxy brain stuff that doesn't quite hold up. It's like during the process, all these people on social media, when we'd post update for, like, Netflix isn't really interested. They're just trying to drive up the price. And then, guess what? They came to a deal.
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A
True, but it would freeze a competitor. We know that Netflix has been concerned about the Ellisons and what they might do with Paramount. They're already taking talent from them. They're already talking about combining studios and getting Oracle and TikTok involved. And that if I'm Netflix, like, I am a little concerned about that. And if you can take them out for a few years, why not do it? The breakup fee is $5 billion, which is not nothing, but might be worth it to spend on something like this.
- [11:55]
C
The concern about David Ellison getting another studio library may have driven or added to their interest in doing the deal. I. I really don't think that you go through the pain in the ass that is first negotiating this deal and getting into an agreement and then the regulatory like they do not want to make themselves suffer for two years just to delay something happening. I think they believe that they can get this deal through.
- [12:20]
A
But if it doesn't, then it's a nice little happy offshoot.
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C
Correct. And if it doesn't, they have essentially had a little bit of a pain in the ass to keep this away from a major competitor. That part, sure, I think it's part of the calculation. But the notion that this is all some grand scheme and they don't think they're going to get it. I think people are thinking too hard.
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A
Did you hear Ted this morning on the call, the 5am call? He sounded tired.
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C
I think he sounded tired, but he also sounded very happy.
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A
Not as happy as David Zaslav. Have you seen those numbers on what David Zaslav is going to make from this? I mean, this is one of the all time grifts. I mean, this guy has changed his compensation so schedule to better match the situation the company is in to pay him more money. When it was all based on the stock. He was making great money until the stock tanked. Then they switched it to free cash flow so he would get paid on the free cash flow. So he made more money. And then right before this company's about to be sold, he switches it up so he gets a whole bunch of equity and he can buy it at $10 and now the stock's up to like $25. He. He's gonna make hundreds of millions of dollars on this for managing a company for three years and taking the stock down by 2/3 until somebody wanted to buy it. And then he cashes in. Unbelievable.
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C
Amazing work.
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A
No notes. No notes for David Zaslav, especially because.
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C
He'D already been paid probably like a billion dollars just in salary for running Discovery and not really succeeding that much.
- [13:54]
A
No. And he gets to stay in the job. He gets to stay and throw his parties at CAN and get people to come to his Bob Evans parties.
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C
Are you a believer that there will be a job for him on the other side of this? Again, let's say the deal gets approved.
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A
Well, there's two things. Will there be a job for him or was a job promised to him? Those are two separate questions. And another conspiracy theory is that he nudged this deal towards Netflix in part because his friend Ted Sarandos, who we know was with him in Vegas watching a UFC fight, recently may have mentioned to him that there would be a role for him at the combined company. I don't know if that happened. I, I do think they will do something with him, whether it's to put him on the Netflix board or to give him some cushy job. I don't think he'll be CEO of the combined company, but they may do something with him when, you know, when, and if this closes and, and if the Justice Department sues, that could be two years from now. So, you know, it's not something that's gonna happen tomorrow, but. And we'll get to that. The regulatory part. But I wanna go to the other side of this coin. Why didn't Paramount get this deal? Cuz you and I both are on record on this show saying they were the favored candidate here.
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C
Yeah, I think they misplayed it.
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A
I think so too. And I have reporting that suggests people in the room believe they misplayed it.
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C
Likewise, they were overconfident in them being the only ones who could get it approved.
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A
Yes. And they messaged that out very aggressively in a way that they were aggressive.
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C
Throughout this process in a way that I think hurt them. Right. They tried at the beginning to not be over aggressive with the three offers. I mean, that's still aggressive. But they didn't go public. They did probably leak it, but we'll not cast aspersions there. But I think once the board didn't accept any of those and it became a process, they, they got increasingly aggressive and hostile.
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A
Well, just going after the whole company when the plan was to split was an aggressive move. And they did that because they thought they could box out Amazon, Apple, Netflix, some of these other companies that were going to potentially wait for the split to just buy the assets they wanted. They thought they could go in and say, oh no, no, we'll take those garbage TV networks as well. And, and then everybody else would be like, all right, whatever, we're out.
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C
And I don't think that they really, they were ready for Comcast, which, and they thought they would win and I think they would have beaten Comcast. I don't think they were ready for Netflix. They didn't think that they would go after it that hard. They didn't think they. I remember when we first reported that like how much debt Netflix was raising to do it and how much cash was going to get offered. And I spoke to some people on the Paramount side right after that. They were like, is that real? That's crazy. Like they, I, they definitely were not quite ready for where Netflix chose To go.
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A
Was that your David Zaslav impression?
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C
That was not a David Zaslav impression.
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A
Lucas, great to see you. That's my David Zaslav impression.
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C
Yeah.
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A
And also, like this whole notion of Trump has kind of selected one bidder. That may end up being true. Trump has not weighed in yet as of this tape date. Yeah.
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C
What do you make of the fact that Trump hasn't weighed in yet?
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A
I. I don't quite know because I thought it would have been one of those first thing in the morning, immediately, Netflix, but bad, bad, bad, bad, bad. Yes. This is a rigged process. You know, they're, they're out to take the media away from you. I don't know why he hasn't. I think he will at some point. I think that Ellison is also going to go hostile here. Let's talk about this, because his options here are, and I laid this out in more detail in my Puck newsletter, the options here, obviously to wait for the regulatory review. If the government doesn't like this, the DOJ can sue and try to stop the merger on antitrust grounds, which is.
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C
Not really an Ellison strategy. But they can decide this is our best path. Trump has assured us that he will intervene. Yeah.
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A
And we're already seeing some key Republicans making noises like that, including the chair of the Senate Antitrust Committee and people like Steve Bannon. The messaging is getting around that this is a Republican cause. So I think that we are going to see some action from the doj. That's one element of it. Now, the Ellisons can be proactive and I've talked to people in their orbit that say that they are leaning towards doing something here. They can. You know, Larry is apparently very upset about this. He thinks that they've been railroaded on this. And David, I think, is obviously upset as well. And they may go nuclear. They may go directly to shareholders and say, listen, we are prepared to offer you more money. Your CEO and board did not do their diligence and, you know, take responsibility here. So listen to our offer. Now, There is a $2.8 billion termination fee that Warner would have to pay to Netflix if they take another bid after negotiating exclusively. But they could just make the Ellison's pay that and maybe they do go directly to the board or sue under some kind of fraud or.
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A theory where this was a rigged process.
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C
Yeah, the lawsuit seems like the hardest one for them to win on. Not that I'm a legal expert. It's just like I don't really get what the case would be. The two most Likely options, I think are what you lay out, which is either they go direct to shareholders or the government intervenes on the go direct. What I'm curious about as of right now, the Ellison posture that I have heard is we made the better offer. This is not right or fair. If shareholders understood they would accept our offer. Warner Brothers Discovery fundamentally disagrees that their offer was better. So it would seem to me that if the Ellisons really wanted to win it, they, they have to think about it and say, you know what? We want it so badly, we're gonna pay even more. Especially. Cause what you're talking about the 2.8, like if, if they came back and said, fuck this, we're going $35 a share. Netflix, you match us. Right, right. Then they probably win because I don't know that Netflix is gonna care so much that they're gonna increase their bid by $8 or whatever.
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A
Yeah. And we know this process because this is what happened with Disney and Fox. I mean, you and I were both around covering this and Disney announced its acquisition of most of Fox. Then Comcast came along and said, actually we're going to bid higher. And Disney had to come around and bid higher than that to get the assets. And it drove up the price. So why wouldn't Ellison do this?
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C
I guess because if he doesn't want to spend that much money.
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A
Yeah, but there's another theory going around that the Ellison money, that somehow it wasn't real, that they had not lined it up properly, that they were sort of flat footed on it and they were scrambling to get these Middle east funds involved.
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C
There are conflicting narratives about the Ellison's financing. People on the Ellison side say, what are you fucking talking about? We're backstopped by Larry Ellison. Are you kidding me? And others are saying, you know, for all they're talking about it, that not most of the bids were not actually backstopped. And when it was backstopped, there wasn't enough documentation. And it gets messy. It's a little bit of a he said, she said situation.
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A
Yeah. And I'm sure that will play out over the next few days. But they're, you know, they're trying to come up with a narrative that would excuse or support what Netflix ultimately did. I guess the big, the big thing would be if someone from Netflix went on the record and said, yeah, yeah, you know, we looked at their offer and it was garbage. Something like that.
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C
Yeah, I mean, I don't think they're.
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A
Not going to do that because what if they turn around and well, but.
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C
I don't think they. I don't think they get to see see the other person's offer.
- [21:31]
A
Yeah, no, that's. You're right.
- [21:37]
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- [23:13]
All right, so let's talk a little bit more. We've done the deals. Let's talk a little bit more about practically, what is this going to look like? What happens first to Warner Brothers here? Let's say this deal goes through and Warner Brothers becomes subsidiary of Netflix Incorporated.
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C
I think the television studio, at least in the near term, continues to produce and license for others. I think the movie studio obviously continues to make movies. They do get released in theaters. However, I think Netflix is pretty clear that they're going to push for shorter windows. And the question for theaters will be if Netflix has Warner Brothers. And you really need those movies because Warner Brothers is like A quarter of the domestic box office. Are you going to accept? Let's call it a three week window, right?
- [24:03]
A
Yeah, it's a leverage point for sure. And Ted, on the call this morning, you had to listen to it because I don't think any of the quotes in the media do it justice. Because the way he presented it was, yes, we're going to honor the windows on these movies.
- [24:19]
C
And we do put movies in theaters.
- [24:21]
A
Yeah, we put 30 movies a year in theaters. It's not our fault. It's the windowing on the theaters, which is BS but it is their fault. If they agreed to a 45 day window, they'd have 30 movies a year playing in all the chains. But what I think is going on is he's committing to. To honoring these theatrical windows for the HBO movies, which is where the Warners go. The Warner's movies go there. And in those contracts it has, yes, after a certain window, it will go to HBO Max. But then he started talking about language of evolving the model eventually and being consumer first. And when he starts talking about consumer first, he's talking about direct to consumer, direct to streaming. And I think that my takeaway from that, maybe I'm biased. I know you think I'm biased on this subject. My takeaway is that yeah, they're going to do what they have to do to not cause pitchforks in the street. But eventually most have thought all of these movies are going to Netflix.
- [25:20]
C
I think it's what I said earlier, which is that Netflix is totally open to doing, and this has been true for a while, more limited theatrical windowing. They're going to try to now use probably their extra clout in the marketplace to push through what they want theatrically because it's harder for them to push through what they want theatrically when they have a bunch of movies that theaters maybe don't care about. Right. But when they say, if you want the new Batman, like why can't we do a 17 day window like Universal does with P VOD? That would be my guess, yeah. Here's the counter though. Minecraft 2 is going to make a billion dollars.
- [25:56]
A
Does Netflix want to sacrifice that financial.
- [25:59]
C
Upside to pull it out of theaters after 18 days? Netflix's argument is gonna be that that movie makes the lion's share of its money in the first two or three weekends and it'll get more out of than having it on Netflix right away than leaving it in theaters for another three weeks.
- [26:13]
A
Exactly. That's what they would say for sure. And they are not allowed to make that argument right now because the theaters do not engage in that discussion. If you do not adhere to a certain window and with all these Warners movies, maybe they're able to make the theaters budge.
- [26:30]
C
Maybe. Don't know.
- [26:31]
A
Yeah. The other element here is it will be a carrot to dangle to filmmakers. As we've talked about, there is a level of filmmaker that currently will not work with Netflix. And maybe you switch them over to Warner Brothers and they can get a theatrical treatment to win a project. You know, you give them the 45 day window to get the project and. And then all of a sudden something that's at Netflix gets developed over at Warners.
- [26:56]
C
Right. I mean, the other thing is if you are offering to a filmmaker, you get a certain release in theaters via Warner Brothers, this great studio, and it then goes to Netflix, the number one streaming service. That's a very compelling one too. Right. You think about the way that some of the Illumination movies or the Sony movies have benefited from being on Netflix.
- [27:20]
A
No, it's good. That's a good point. All right, so that's the studio. The more interesting question is what happens to HBO and HBO Max? Because they seem to suggest that they are first of all keeping it. They're not shutting it down like some had speculated. They at least not at start. It seems to be that they want to use HBO as kind of like an upsell almost bundle it together with Netflix and charge extra. Whether it's a separate service or whether it's a tile within the Netflix app where you would keep the HBO branding and ethos and development teams and all of the things that go into making HBO what it is, but just have it live adjacent to Netflix. Is that your sense?
- [28:09]
C
I think my reading, yes. Similar. I think my reading is that you can start to view this as Netflix's like Amazon channels moment.
- [28:19]
A
Oh, so you think they're gonna try to use it to recreate the cable model? The cable where you go to Netflix for all of your entertainment, whether it be hbo and maybe they do a deal with Starz or others so you can come to there and get everything.
- [28:34]
C
I don't know that they have decided yet, but if I had to guess, I think so. Because that's what they're doing with. That's what they're doing with TF1 in France. It's what they've done in some other places.
- [28:44]
A
They're running the feed of that cable network.
- [28:46]
C
I think they like the idea of treating Netflix essentially as cable.
- [28:51]
A
Well, it's a great model. My Colleague Julie Alexander at Puck just wrote a piece about this. And the Amazon channels business has been hugely successful for Amazon because they take a cut of all of these streaming services that they're hosting on on their platform and they can sell ads against that. You know, the inventory is negotiable. And why wouldn't you do that if you have 300, 400 million people on your platform?
- [29:16]
C
So they're just becoming a cable provider.
- [29:19]
A
Basically, which is what Amazon basically is right now. But with the economics of the iPhone.
- [29:24]
C
A cable provider that happens to own the most popular channel.
- [29:27]
A
Yeah, which is what essentially Comcast was when they had USA in their NBCUniversal fold, and they had NBC, they had two extremely popular channels on a cable system that they owned for 30 million subscribers. And this is that, but on a global basis. And if, if Amazon can do it, why can't Netflix?
- [29:48]
C
I also think what will happen is that they will take some of the programming that's on HBO Max right now and just put it on Netflix. Like, I think Friends will be on Netflix in however long that is.
- [29:58]
A
Yeah, well, that's the whole thing is that, you know, they're talking, all these analysts are talking about cost synergies and savings, and they're going to get a billion dollars here. I mean, the big cost saving is they're not going to have to license these movies. Every single one of these Warner Brothers movies that you see in the top 10 on Netflix, that is an individual license that Netflix is paying for, and it comes on, the service comes off, and they've got to pay based on usage and they just will own it. It's a huge, huge benefit.
- [30:26]
C
Yeah, well, they still have to pay themselves, but. Yes.
- [30:29]
A
And they have to pay the participants as well. Yes, but maybe someday they think there will be no participants.
- [30:36]
C
What is the most legitimate concern you've heard and what is the most deranged concern you've heard?
- [30:42]
A
Well, I've heard end of cinema several times that the theatrical business is so perilous right now that if you took even 10% of the movies out of the marketplace, it will collapse. And that's a best case scenario for ultimately not year one, but maybe year five. The plan is for Netflix and Warner Brothers, so theaters should plan on closing a bunch of their multiplexes. That, to me, is a little over the top. I do think that theaters are under. And if I were the theater owners, I would be lobbying hardcore for some kind of a guarantee we talked about on the show that they have to release a certain amount and the Government will make them.
- [31:27]
C
Yes. I got a call actually about that episode from someone insisting that there is no clause in a contract between the studios and the theater owners mandating theatrical. That the studio owners owe it to talent, but they don't owe it to theater.
- [31:43]
A
Oh, yeah, no. I mean, they do contracts, but, you know, the distributor and the exhibitor have a contract between each other. But when you greenlight a movie, I don't think there's any contract privity with the exhibitor.
- [31:55]
C
Right, okay. Do you think that because, like, you know. Yes. A lot of people very freaked out, including folks at Warner Brothers at the moment. Do you think they would be more or less freaked out if it were Paramount?
- [32:08]
A
That's a great question, because I think that the guilds and all these others that have been lining up, they were.
- [32:14]
C
Going to be mad either way.
- [32:15]
A
Exactly. And the antitrust people are going to be mad either way.
- [32:18]
C
Elizabeth Warren would say, no, thank you. Your friend Matt Soul would say, no, thank you.
- [32:22]
A
Yeah. And at least, you know, at least in Hollywood, the politics of the Netflix people are more aligned with more people in Hollywood than the perception of the politics of the Ellisons who are in bed with Trump. So maybe there's something there. But I actually think because there is just this suspicion of Netflix, it's still, after all these years, consider this insider, not one of us. There's something going on with them. They're using our data, they've changed the model. All the things we all hear about Netflix, there's more suspicion towards them. But I would argue, and I actually did in my newsletter, that if you look at what would happen under the Ellisons and what will likely happen under Netflix, the Netflix scenario is probably better for the overall entertainment community than what would have happened with the Ellisons. It would have been Paramount 2.0, where there would just be mass layoffs, synergies everywhere. You're combining two studios, two streamers, two news divisions, two of all of these things. And. And that just equals firings and synergies with Netflix. The better question to ask is what are they adding by bringing this company in? And if it's not something they already do, then likely they're either not going to do it and all those people will get fired, or they're going to do it and they're going to just have the Warner's people doing it. So in a weird way, Netflix kind of could be the best of these three bad situations because it's not a. It's not a straight smash together, merge and fire.
- [34:02]
C
Right. You don't have the same level of redundancy. The question is, is a company known for being as ruthless as Netflix really going to absorb all those employees? Or will there be mass layoffs that they're just not broadcasting right now? Because it's not obvious what they will.
- [34:20]
A
Be, right, or they don't even know, or once they got under the hood and they'll be like, wait a second, why do you have 10 people doing this job? We have one person, so get rid of nine.
- [34:28]
C
You have how many people at your gaming studio? Do we really need all those people?
- [34:32]
A
Do we have a publicist clown car for every premiere? Like, one person can do this?
- [34:38]
C
Yes. You do what in theatrical distribution, we.
- [34:41]
A
Don'T, you know, and the Bobs are going to show up and your job is.
- [34:48]
That's so sad. Okay, so where do we leave this? Winners and losers here. And the overall freakout scale? One to five on the defcon.
- [34:57]
C
Remember that with defcon, one is the most.
- [34:59]
A
Oh, right. Five to one. Five to one. So let's go sneaky. Winners and losers here.
- [35:04]
C
Do they have to be sneaky?
- [35:05]
A
No. I mean, my big winner is David Zaslav's party planner.
- [35:11]
Because he is gonna get to throw dinners and he's gonna make people come and Margot Robbie's gonna have to sit there and listen to him pretend that he's charming. And that's not going away.
- [35:20]
C
I'll give the really wonky Bloomberg answer. Wells Fargo.
- [35:24]
A
Oh, why? Because they're doing the loan for Netflix.
- [35:28]
C
Because this is. They're not like one of the top three or four banks and they get this mass, like one of the biggest loans ever for Netflix. It is like a huge win for them.
- [35:38]
A
That is not successful.
- [35:40]
C
You went with the most Hollywood answer of the party planner. So I had to go with the most Wall street answer of Wells Fargo.
- [35:45]
A
Yeah, I mean, we could talk about the bankers.
- [35:46]
C
Hooray from walls for Allen and Company.
- [35:49]
A
Oh, yeah. Great. Great job, guys. Amazing.
- [35:52]
C
Big win for Vests.
- [35:56]
Rich Greenfield has the Netflix over Warner Brothers Vest now.
- [36:00]
A
Yeah, we're joking. But, like, is there an area of the business that this is good for? Like the creative business? Is anyone benefiting here other than a potentially bigger platform for some of these projects? Because Netflix is a pretty big platform.
- [36:14]
C
Warner Brothers and HBO have more or less been mismanaged for a decade.
- [36:21]
A
Do you longer AOL was like a word.
- [36:24]
C
Yeah, but there was a post aol. There was a period where it was well managed. Do you believe that this will actually be better for it in the long Run. That would be the like, bull case would be Netflix has been a really well run company for the most part over its time. And they are, they have only increased their spending and there's not going to. It's sort of what you were laying out about the fewer cost cuts. I'm not sure I'm ready to go there. But that would be the, like, why that's the way it's good for the industry is it's a, like a bigger, healthier company that's inheriting it and not one that's going to like, give up in three years like the previous two.
- [36:59]
A
Owners and has a big apparatus. I mean, one creative producer was texting me about this and he's like, Netflix is like a professionally run content machine. And having them running HBO is better than like, no disrespect to David, no disrespect to David Ellison, but like, their content isn't amazing all the time.
- [37:23]
C
Well, that's. Some people would say that's also true of Netflix.
- [37:26]
A
No, no, I know, but at least they, they have made good stuff.
- [37:29]
C
Well, and they have proven it. David Ellison is just starting to prove himself running Paramount. Right?
- [37:34]
A
We don't know what. Yeah, totally. And you know, and, and it's like we've just sort of accepted that David Ellison was this guy that was going to roll up all these companies and like, why, why, like he was running a pretty minor. They had a lot of projects, but it wasn't like he was this guy that everyone had anointed as the savior of Hollywood until he sort of anointed himself.
- [37:54]
C
Right.
- [37:56]
A
No disrespect. I mean, he's, you know, he got Paramount and I think they're spending and doing good stuff. But Netflix has done this over 15 years and we've seen it. Right. All right, Losers.
- [38:07]
C
We don't have any other winners besides what, David Zaslav, Ted Sarandos, I mean, the usual.
- [38:12]
A
Obviously, you know, everything involved with David Zaslav is a winner.
- [38:15]
C
All the non Ellison Davids. David Geffen.
- [38:18]
A
David Geffen. Huge winner for losers. I have Nepo babies. Not great for Nepo babies. Barry Weiss. She was potentially going to also run cnn.
- [38:29]
C
Cnn, yeah.
- [38:30]
A
And now that's not happening. Although Ellison could still buy cnn.
- [38:33]
C
Still buy it. So, yeah. Lena Khan.
- [38:39]
A
No, I mean, yeah, I guess. But the antitrust people are going to have a field day on this. They're going to get on all the shows, they're going to be out there, they'll write the op eds. It's a very public Antitrust battle. They like that.
- [38:52]
C
If we knew a little more about the executive structure, there are some executives we could pick as losers in all of this.
- [38:58]
A
Yeah, but that's true. I know. We haven't even. There's a lot to talk about. We're not even talking about who's going to report to who. And, you know, do these content executives fight? And we don't need that. All right, any takeaways?
- [39:09]
C
You mean beyond the. The 7 to 75 that we've done? Who's the DEF CON for?
- [39:14]
A
Who? Like a person?
- [39:16]
C
No, no, like, DEF CON is like the alert level for the U.S. government. So, like, what are we talking? Like, who is. Who is really? Are we talking about, like, the industry? Hollywood industry? Yeah.
- [39:24]
A
If you were at a dinner party and someone said to you, is this bad? Like, what do you say on a scale of five to one, one being this is like Hollywood apocalypse, and five being like, eh, whatever. Shoulder shrug. Where do you put this?
- [39:42]
C
Maybe like two and a half?
- [39:43]
A
Yeah, I was gonna go between two and three. It's not great. It is ultimately a big buyer being eliminated from the market.
- [39:50]
C
Yeah, I think so.
- [39:50]
A
I think say all they want about how they're spending more. But you know what? Disney said the same about Fox, and it didn't happen. And these mergers always lead to less spending.
- [39:59]
C
The part of this that's hard to judge is like, are you measuring it against a scenario of no deal or are you measuring it against other deals? Right.
- [40:09]
A
Well, you're also. Are you measuring it against other potential suitors?
- [40:13]
C
Well, that's what I mean. If you're comparing Netflix to Paramount or Comcast, I think they're like all different shades of the same thing for the industry. Right. Netflix being a little different for the reasons we've discussed. And so by that Measure, it's like DEFCON 4, because this was going to happen anyway, so just deal with it. But obviously there's a world in which this didn't happen. They weren't necessarily planning on it happening until the Ellison started coming after them. And if the alternative was it stays independent, then for most people, that might have been preferable.
- [40:42]
A
All right, well, on that note, I look forward to talking with you about this for the next year, every week for the next year, until nobody will come up to us at parties because they're sick of it. All right, thank you, Lucas. Thanks, man. All right, no call sheet today. I want to thank my guest, Lucas Schaub, producer Craig Horbeck, art editor Jesse Lopez, and I want to thank you. We will see you next week.
- [41:04]
This episode is brought to you by Universal Pictures presenting the film Wicked for Good. Directed by John M. Chu. Wicked for Good is the epic, electrifying and emotional conclusion to the untold story of the Witches of Oz. Deadline calls it a masterpiece and the movie that we need now for your awards consideration in all categories, including best Director, Jon M. Chu best Actress, Cynthia Eribo, best supporting Actress, Ariana Grande and best picture of the year, Wicked for Good, now playing in theaters.
- [41:34]
D
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